More Than a Basketball Legend: Breaking Down Magic Johnson's Speech at Penn

Published by Daniel Lewis (Featured Contributor) on March 20, 2010 at Yahoo! Sports.

The Wharton School/University of Pennsylvania

On March 18, 2010, former basketball star Earvin "Magic" Johnson presented a lecture at the Wharton School of the University of Pennsylvania in which he discussed how he developed his empire, Magic Johnson Enterprises, after retiring from the NBA. As a member of the audience, sports journalist Daniel Lewis delves into the key messages of Johnson's speech.

In the inaugural Wharton Leadership Lecture hosted by the Lauren and Bobby Turner Social Impact Executive Speaker Series, Earvin "Magic" Johnson discussed the strategy behind building his business empire.

Approximately 70 percent of NBA retirees go broke within five years of leaving the league. Johnson is not one of them; in fact, he has gone beyond managing his basketball career earnings well, parlaying his NBA millions into an entirely new career with a number of successful businesses to his credit.

Johnson was the leader of many championship teams as a member of the Los Angeles Lakers. For the past twenty years, Johnson has run an entirely new team, the Beverly Hills-based Magic Johnson Enterprises, a collection of businesses with an estimated worth of $700 million.

Johnson's impressive basketball résumé includes five NBA championships as well as a gold medal as part of the "Dream Team" in the 1992 Olympic Games. These accomplishments notwithstanding, Johnson may be bigger now as a mogul than he was as a basketball player.

The Hall-of-Fame point guard has shown that he has the acumen for more than basketball. He has developed his business empire by opening upscale venues in an area largely ignored by corporate America: the inner-city.

Johnson formulated this strategy of focusing on inner-city communities as a college basketball player. Whenever he returned home to his neighborhood filled with decrepit buildings, he would observe residents having to travel long distances to shop or eat at the same chain stores and restaurants that were so accessible to those in the suburbs.

"Most of the people who own the businesses in urban America don't live in urban America, so they take the money to their communities and spend disposable income in their communities," Johnson stated. "We have trouble in our communities because we do not own the businesses. Now that we put Starbucks there, those same people that live in the community, they spend money there and Mom and Pop stores have more traffic. Now they don't have to close their doors because people have money to spend at those stores."

In this sense, Johnson's business ventures have done more than make a former NBA superstar even richer. Indeed, Johnson views his business as a direct way of serving the community.

"There have already been people who have made millions, so you're not doing anything that anyone else hasn't done before," Johnson said. "Can you save and touch somebody's life? Can you help a community get back on its feet? That hasn't been done before. You can set yourself apart from everybody else if you can do something like that. That's why I love what I do."

For example, Magic Johnson Enterprises has partnership with Abbott Labs to provide education and offer free HIV testing in cities with high infection rates. HIV prevention and management is a cause close to Johnson, who retired from the NBA for the first time in 1991 after discovering that he had HIV.

In addition, the business' nonprofit arm, the Magic Johnson Foundation, operates community empowerment centers, organizes job fairs, and offers college scholarships to minority high school students.

"Going down the street growing up, I knew if I turned left that trouble was there. Every time I would come to that street, everybody would say, 'You've got to go that way, young man. You've got to go right.' So I kept going right," Johnson noted. "Just think of all the ballplayers and entertainers of color-somebody told them to go right, too. So why don't you come back?… You've got to go back and you've got to help out. If you can touch and bring ten people with you, then they bring ten and then they bring ten and now the community changes."

While his business acumen has translated into an empire, it was far from easy for Johnson at first. When he attempted to launch his first business plan, his numerous on-the-court accolades meant nothing as he approached investors, who saw him "as a joke" and wondered what a basketball player knew about running a business.

"Everybody wanted the autograph, but nobody wanted to invest with me. At the beginning, I got turned down ten times before someone said 'yes.' You know what they said? They said I was a dumb jock."

Investors not only doubted that Johnson could be a businessman, but also questioned his business plans. As part of his first venture, he opened several movie theaters in urban, primarily black neighborhoods, but encountered difficulty in convincing other businessmen that it was a viable business model.

A turning point came in 1995, Johnson detailed, when he dragged Starbucks CEO Howard Schultz to a raucous Friday night showing of Waiting to Exhale, a film based on the Terry McMillan novel, starring Whitney Houston, at one of his theaters.

The theater's lobby and screening rooms were packed. "Our biggest screen had 500 women inside. All of a sudden every woman thought she knew Whitney Houston personally and started talking to the screen. So Howard grabs me about 20 minutes in and says, 'Earvin, I never had a movie-going experience quite like this.' Guess what happened? That got me the deal.'"

That first deal was the first among many that has allowed Johnson to carve out a role as a liaison between big-money investors and the residents of urban neighborhoods.

Magic Johnson Enterprises now owns or operates Starbucks coffee shops, Burger King locations, gyms, movie theaters, and several other businesses in 85 cities across 21 states. His Canyon-Johnson Investment Fund has been behind nearly $4 billion in urban revitalization projects that have spurred the creation of 4.5 million square feet of retail and commercial space.

He credits his success to having a concrete business plan for which he had a passion as well as an ability to see the business potential in urban, minority-laden neighborhoods. He sees himself and his empire as a catalyst for positive change in his community, operating with the understanding that making a difference is his first priority and that making money follows.

The difference between a good point guard and a great point guard, according to Johnson, lies completely in the vision. Great point guards see the court differently-they envision passing lanes, watch where teammates are moving, and probe the defense. Johnson, arguably the greatest point guard ever, has parlayed that superior basketball vision into a business empire.

There is no doubt that Johnson was a transcendant talent on the basketball court, but what he has done since being named as one of the sport's all-time greatest and being coronated into the Hall of Fame perhaps ranks as even more impressive.